Corporations Amendment Regulations 2010 (No. 4) (89 of 2010)

Schedule 1   Amendments

[3]   After regulation 7.1.19

insert

7.1.19A Retail clients and wholesale clients: price of margin lending facilities

(1) This regulation makes arrangements about the price for the provision of a margin lending facility, or a margin lending facility whose limit is proposed to be increased, within the meaning of subsection 761EA (1) of the Act.

Note Under paragraph 761G (7) (a) of the Act, if a financial product is not, or a financial service provided to a person does not relate to, a general insurance product, a superannuation product or an RSA product, the financial product or financial service is provided to the person as a retail client unless the price for the provision of the financial product, or the value of the financial product to which the financial service relates, equals or exceeds the amount specified in regulations made for the purposes of that paragraph as being applicable in the circumstances.

Under paragraph 761G (10) (a) of the Act, the regulations may also deal with how a price or value referred to in that paragraph is to be calculated, either generally or in relation to a specified class of financial products.

In general, the ‘price’ of a product will be the amount that is paid to acquire or be issued with the financial product. The test for the price of the product in paragraph 761G (7) (a) of the Act will be determined at or before the time the client acquires, or is issued with, the financial product. If a client pays $500,000 or more to acquire or be issued with the financial product, the client will be a wholesale client in respect of the product.

Price

(2) For paragraph 761G (7) (a) of the Act, the amount applicable in relation to the margin lending facility is $500,000.

Working out price

(3) For paragraph 761G (10) (a) of the Act, the price of a margin lending facility is to be worked out so that it is the same as the value of the secured property or transferred securities contributed by the client for establishing the facility.

(4) For paragraph 761G (10) (a) of the Act, the price of a margin lending facility whose limit is proposed to be increased is to be worked out so that it is the sum of:

(a) the current value of any secured property or transferred securities previously contributed by a client for establishing the facility or increasing the limit; and

(b) the value of any additional secured property or transferred securities contributed by the client in relation to the latest increase of the limit of the facility.

(5) For subregulations (3) and (4), any secured property or transferred securities contributed by the client that is funded by borrowings from a third party is not to be taken into consideration when working out the price of a margin lending facility.